Continued: State raises property taxes for 20,000 in Minneapolis

Some 20,000 Minneapolis residential property owners will pay higher tax bills next year because the state has overruled the city assessor on how much their property values fell.

The hit will be felt in 18 neighborhoods in the University of Minnesota and Nokomis communities. The bill on the median parcel in the University community will be $115 more than otherwise; the median hit in Nokomis will be $100.

Owners of residential property in the areas -- whether single-family, condo, duplex or triplex units -- are effectively left without a feasible appeal. That's because local deadlines have passed, and just the filing fee for going to tax court would cost more than most homeowners would gain.

Minneapolis and Hennepin County officials said it's the first time they can recall the state ordering such a change in Minneapolis.

"It's unprecedented," said Mayor R.T. Rybak. "The state is using flawed methodology to put an unfair tax burden on the residents of Minneapolis."

The state ordered that buildings be assessed at 5 percent more than the city assessor proposed. That still means a drop in values for many residents -- just not as much.

City Assessor Patrick Todd vigorously disputes the state's calculations, which he said work well only in a static market. Property values in much of the city have sunk for the city's 2008 assessment, which affects next year's taxes. Todd estimated that residential values dropped 6.7 percent.

The state essentially ruled that Minneapolis overestimated that slide. It stepped in under its power to equalize assessment practices to make sure that all taxpayers within a county pay their fair share.

Although the state ordered scattered adjustments elsewhere in Minnesota, most affected townships or small towns. Minneapolis officials sought to deflect the blame back to the state.

"You can tell I'm not really happy about this," Todd told City Council members. He said he learned late last week that the state had rejected his office's appeal.

The state requires property assessments to fall within a ratio of 90 to 105 percent of recent sales. The city's 2007 ratio of assessments to values was 94.7 percent. Todd then lowered residential assessments by 6.7 percent for the 2008 assessment, reflecting lower prices for homes.

By state calculations, that took the sales ratio down to 88.4 percent of outside the acceptable threshold. So it ordered 5 percent increases in assessments for the two portions of the city where it judged values were most out of whack. For median homes, that assessment is $8,100 more for the University area and $7,100 for Nokomis. Two council members, Sandra Colvin Roy and Scott Benson, are among those nicked.

Todd argues that the state's methods are flawed in a rising or falling market because they look at how the assessor has adjusted assessments without similarly adjusting for recent sales. Taking sales through last week into account, the city's ratio stands at 94.8 percent, he said.

The state admits in its analysis that it's aware of the shortcomings of its methods, but hasn't found an acceptable alternative. But Minneapolis needs to play by the same rules as other communities, the Revenue Department said. It said it will bring the issue to the state's assessors association for review before next year's assessments.

Minnesota Revenue Commissioner Ward Einess said he was surprised by Rybak's criticism. "This really is an apolitical, nonpolitical data-driven decision," he said.